Bitcoin Mining Facilities

Bitcoin Mining Facilities Thrives in Old Soviet Industry in Siberia

September 2, 2019 at 2:01 AM | By Jit Sutradhar Feature

The Takeaway:

  • The abandoned factories of the Soviet era of Russia are enjoying a second life as cryptocurrency mining facilities.
  • The large hydroelectric plants of Siberia (another legacy of the USSR) have attracted miners with cheap electricity.
  • Favorable energy prices and naturally cold weather are making Siberia an international mining center with miners from Europe, Asia and the United States who place their platforms on local farms.

Built during the Cold War to boost Soviet manufacturing, the Bratsk hydroelectric station in eastern Siberia is now fueling another energy hungry industry: bitcoin mining.

Several large mining farms have been installed in Bratsk, an industrial city on the banks of the Angara River, taking advantage of the low temperatures of the region, which keep cooling costs low, and the abundant and economical electricity of the hydroelectric power station.

Bratsk is an example of how the ruins of the Soviet empire have become fertile land for new and somewhat exotic flowers. After the USSR collapsed and parts of the huge industrial sector, mostly military oriented, began to wither in the chaos of the nascent market economy, many factories had to close.

In recent years, miners have taken part in the slack.

Bratsk hydropower plant

Bratsk hydroelectric power plant (Photo by Anna Baydakova for CoinDesk)

“The surplus of electricity in Russia is huge, due to the closure of some of the Soviet plants and the fact that energy consumption, in general, became much more efficient over time,” said Dmitry Ozersky, CEO of Eletro .Farm, A mining company that builds a large store in Kazakhstan.

As a result, bitcoin mining farms across Russia now have a combined capacity of 600 megawatts, which represents almost 10 percent of the 7 gigawatts of total energy that support the bitcoin network worldwide, said Ozersky, a former banker and senior manager of the Russian state corporation. Rusnano Its estimate is based on data from specialized mining chip manufacturers, known as ASIC.

This number, which represents approximately 7 percent of the total hash power of the bitcoin network, could be 20 percent lower considering older and less productive miners, Ozersky says. By comparison, farms in China, widely regarded as the mining capital of the world, account for about 60 percent of the total network power, according to the recent Coinshares report.

Undoubtedly, Siberia still has a considerable amount of industrial production, including metals and wood. But the plants that were allowed to die left behind buildings, land and electrical infrastructure ready for miners to use, making the region an international mining center.

Multinational containers

Driving through a fenced area on the quiet outskirts of Bratsk, we cannot find an entrance. Concrete walls and metal doors have no signs: only authorized and expected guests can enter.

My accidental driver, Ivan Kaap, is the head of security at a large mining facility in Bratsk called Bitriver, but we are visiting his company’s smallest competitor, Minery. We called the CEO and he lets us into a fenced field with 26 metal containers, buzzing loudly and covered with rotating fans.

Minery’s mining farm in Bratsk

The Minery mining farm in Bratsk (Photo by Anna Baydakova for CoinDesk)

Inside, a group of men and women focuses on the CEO, Ilya Bruman, complaining about the souvenir shirts he is distributing. Chinese, Korean, Japanese, American and Brazilian businessmen have come to Bratsk to tour local mining facilities.

Sam Chi, president of Landmark Entertainment Asia, which is mining bitcoin to finance its operations, notes two containers where their own ASIC reside. When asked why from all places he chose this (in a part of the world that was once synonymous with “exile”), he said he liked the level of security offered by Minery.

Chi told CoinDesk:

“I want to sleep well at night.”

Pablo Lobo, from Sthorm, a company that extracts bitcoins to fund a research laboratory, gave another explanation: the Siberian climate makes it easy to choose a mining host, providing natural cooling for most of the year. Sthorm has not yet placed ASIC in Minery, but is considering it as an option, he said.

The average winter temperature in Bratsk is around 0 degrees Fahrenheit. In summer, it can reach temperatures of up to 77 degrees, but mostly it stays around 60, and the warm season (that is, when it is not cold) lasts four or five months a year. The average annual temperature here is 28.

Minery has two places around Irkutsk with a total capacity of 30 megawatts, says Bruman. The one we have can handle 10 megawatts and still has room for new customers; the other is totally occupied by a client, he said.

Ilya Bruman, CEO of Minery

Ilya Bruman, CEO of Minery. (Photo by Anna Baydakova for CoinDesk)

Customers come from the United States, Russia, Korea, India, Japan and Spain, says Bruman. According to him, two days before meeting us, the place accepted 550 ASIC plus sent by a customer from Korea, and during the first night, the machines produced half a bitcoin, with a value of approximately $ 5,000 currently.

Miners in Russia often use spare places in large industrial plants because they have the electrical infrastructure ready to use. Minery’s farm has bought the land where a factory used to repair metal parts used to be.

Hear them roar

“We have three guards armed with automatic rifles, one looking at the cameras and two patrolling the territory.”

That is Kaap, a former police officer, who describes security measures at Bitriver, a 100-megawatt mining facility, which occupies one of the large docks of an old metal factory. The operations of the factory were significantly reduced in the last decades and now only one store works, while Bitriver rents two.

Ivan Kaap at the Bitriver mining farm in Bratsk

Ivan Kaap at the Bitriver mining farm in Bratsk (Photo by Anna Baydakova for CoinDesk)

There are 18,000 ASICs in Bitriver now, according to Dmitri Ushakov, its commercial director. Most of the machines belong to owners of two countries, Russia and the USA. UU.

The Russians have about 9,000 ASICs overall in place, the Americans placed around 4,000 and Japan ranks third with about 3,000 ASICs in Bitriver, Ushakov said. The rest of its customers are from Brazil, Lithuania, India, Poland and China.

Each week, one or two new customers come, Kaap said. Although the 70-yard long three-story shelf with stairs and walking galleries is only half full, Bitriver expects to see it full in the next two weeks, he said. And in October, the company will start building another frame of the same size, parallel to this.

Then, the number of miners will grow almost four times, Ushakov told CoinDesk: before the end of this year, another building in the old factory, of a similar size, will also become a mining data center.

ASIC-check

Technician verifying ASIC at the Bitriver mining farm. (Photo by Anna Baydakova for CoinDesk)

The wall of miners roars like the engine of an airplane, exhales hot air and flickers small lights. Dressed in uniforms and headdresses that suppress noise, the technicians stand in the gallery on the second floor checking the miners. Electric cables of arm thickness lie on the floor for future construction.

The huge windows of the building are holes without glass: Kaap explains that industrial fans will be nesting there when all construction work is done. The miners are repaired on the spot, he adds, by the company’s own engineers certified by Bitmain in Shenzhen.

Bitriver and Minery are far from being the only players in the region, although Bitriver is one of the largest, at least among those who operate publicly. The third notable in Bratsk is Cryptoreactor, a place with a capacity of 40 megawatts.

Cryptoreactor is also occupying the buildings of a decomposing factory in Bratsk that previously produced several industrial products, saw a series of failed reconstruction plans and finished remodeling for the miners.

“Production has stagnated over the past 15 years, and with each year, the decline would get worse and worse, until in 2017, the owners decided to develop this place in a different way, for example, for a mining hotel.” The CEO of Cryptoreactor, Fedor Egorov, told CoinDesk, adding that at this time, the site houses the ASICs of customers that consume 15 megawatts of the 40 available, with plans to increase capacity up to 63 megawatts soon.

Miners welcome

Electricity in Siberia, generated mainly by hydroelectric power, is one of the cheapest in the world, around 4 cents per kilowatt-hour, and cheaper than the average price in Russia, which is currently around 7-8 cents.

The cryptocurrency has no legal status in Russia and is not subject to taxes or securities regulation. Operating a data center, on the other hand, is a conventional business, and Bitriver has a wide official presence in Bratsk.

As we speak at the Bitriver office on the farm, a secretary tells Kaap that she has a meeting with the mayor of Bratsk scheduled for next week. Kaap says he doesn’t know what the meeting will be about, but admits it’s not unusual for him.

Bitriver’s mining farm building

Bitriver Mining Farm Building (Photo by Anna Baydakova for CoinDesk)

In May, Bitriver signed an agreement with the city government of Bratsk committing to invest $ 7.5 million in the construction of local data centers. The company also sponsors a new veterinary clinic and takes interns from the city’s Bratsk State University.

On August 19, the mayor of Bratsk, Sergey Serebrennikov, visited Bitriver and made a statement posted on the city’s official website. According to the mayor, the city of Bratsk is helping Bitriver “at every step of its development.”

“It is an absolutely new part of the economy and commerce in Bratsk, and for us, this project is interesting in all aspects,” said the mayor. “It provides new jobs and new large taxes paid to the city budget.”

Power generating companies are also friendly to miners: the leadership of Irkutskenergo, the region’s electricity company, was seen at the Baikal Blockchain and Crypto Summit in Irkutsk earlier this month.

According to Timofey Benedyuk, the company’s chief strategy officer, some 500 megawatts of electricity were recently made available by closing the old and inefficient electric boilers in the region. He told CoinDesk:

“One of such boiler house, which we shut down in 2008, we’re now offering for rent to new technological companies, miners among them.”

Ivan Kaap at Bitriver’s mining farm in Bratsk, photo by Anna Baydakova for CoinDesk

Bitcoin Mining Image via Dmitry Demidko on Unsplash

This article is republished from coindesk.com. If you have any questions, objection or any other matter you can contact us. Thank you for visiting our website.

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